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Monday, 22 December 2008

"The Bank relies too much on interest rates to control the economy"

The BBC report an interview with deputy governor of the Bank of England Sir John Gieve. The interview is with the BBC business editor Robert Peston and Sir John Gieve informs us that:
"the Bank knew "crazy borrowing" was taking place and the price of houses and other assets was rising unsustainably.

But the Bank thought this problem was less serious than it turned out to be....

The Bank relies too much on interest rates to control the economy, he added.

...

In the interview with BBC business editor Robert Peston, he said interest rates were "a blunt instrument", because they affected the whole economy."
Just remind me who decided that the Bank of England would be responsible for setting interest rates and giving them few other control mechanisms... Was it by any chance Gordon Brown? Should he not be held responsible?

1 comment:

Life Insurance Canada said...

People have dream..or wish...or idea...of controlling their actual situation. People want to have some button they press and the economy miraculously changes immediately. Interest rate seems like that. It works...in a short term. Unless people understand economy is driven by billions of individual decisions, we will have crazy situations and malfunctions like this one...
Take care
Lorne